Venezuela’s Worsening Crisis

Venezuela was once the richest country in Latin America, with the largest known oil reserves in the world. Today, the country is in shambles in the midst of a political, economic and humanitarian crisis.

Origins

Even though Venezuela was once the richest country in Latin America, it was always plagued by widespread social inequality and corruption. Hugo Chavez, Venezuela’s former president, began a movement that promised to “free the people” from this inequality and improve their lives.

Chavez was elected in 1998 and throughout most of his presidency, he used the revenue from oil sales to build new homes and medical clinics for Venezuela’s poor. These new policies made him popular with the population, but despite promises, he never seriously tried to scale back his spending or Venezuela’s dependence on oil. Instead, he fixed the prices of food staples and stopped exporting them, he nationalised private companies and never took advantage of the bonus coming from oil sales to develop a more modern and sustainable economic model.

With the high level of spending on social welfare programs, the Venezuelan government  has been running a huge fiscal deficit. After Chavez’s death, Nicolas Maduro took office as his handpicked successor. In 2014, prices of oil started to fall, and consequently the government’s revenues sharply declined, meaning the Maduro administration could no longer afford its social programs.

Economic Crisis

Venezuela’s GDP is projected to fall by 18% in 2018 (it already fell by 14% in 2017 and 16.5% in 2016), and Venezuela currently has the highest inflation in the world, making food and medicine inaccessible to most Venezuelans. The International Monetary Fund has also predicted that inflation in the country will hit 1,000,000% by the end of 2018. Bolivars, the country’s currency, has become worthless, with most Venezuelans being forced to operate with dollars that are accessible on the black market, where the rate has reached 12,000 bolivars per dollar.

Crude oil comprises almost 95% of Venezuela’s export, and its dependency on oil has caused severe energy crises, so the government tried to turn to hydropower as an alternative for energy. In 2016, however, water in Venezuela’s dams reached a historic low, and to conserve electricity, the government instituted planned blackouts and a two-day work week for public employees.

To stay in power, Maduro has also rigged the economy – the military got complete control of the food supply in 2016 after he declared a state of emergency, and he set the official exchange rate at 10 bolivars per US dollar for his political allies only. Due to the worthless value of the bolivar and the fact that food is almost unaffordable for most Venezuelans, Maduro’s allies are profiting from this scheme, and therefore helping him stay in power.

In August 2018, Maduro announced a “magic formula” to fix Venezuela’s economic crisis. The formula consists of a new currency that lops five zeros off the bolivar, a sharp increase in the price of fuel and a rise in the minimum wage of more than 3000%. This, however, has been criticised for being unrealistic and ineffective in rescuing Venezuelans from their economic agony.

Political Crisis

Since Chavez, power has been increasingly consolidated in the executive branch. The president can now, for example, suspend unfriendly judges, completely destroying the judiciary’s power to act as a check on the president.

Maduro’s government has strict censorship tactics to silence the opposition, which as a result is currently incapable of taking action against the government.

In 2016, Maduro declared a state of emergency which was backed by the Supreme Court (but not the National Assembly), giving him greater control of the country.

In 2017, the government held elections for the national constituent assembly, a new assembly that has the power to redraft the country’s constitution, in an attempt to override the existing parliament and leave no opposition to Maduro’s rule.

In the 2018 elections, there were several indicators that the government controlled the elections. Not only were the elections moved from December to May, allowing little time for the opposition to campaign, but the main opposition party was banned from running. In addition, there were accusations that food and money were promised to people who voted for Maduro.

Humanitarian Crisis

Venezuela’s economic state has led to a shortage of drugs and other supplies used by hospitals, with the Venezuelan Pharmaceutical Federation estimating that 85% of basic medicines are unavailable or difficult to obtain. In addition, around 30% of school-aged children are predicted to be malnourished.

Besides the lack of resources, the economic state has meant violence in the country has increased, with the country’s murder rate surpassing that of the most dangerous cities in the world. In 2016, Venezuela’s homicide rate was 91.8 per 100,000 people (the American homicide rate is of 5 per 100,000 people), and in the first eleven days of 2018, there were 108 recorded episodes of looting.

People are now desperately fleeing to nearby countries, such as Colombia, Peru and Brazil. An estimated 2 million Venezuelans are projected to leave the country in 2018, adding up to a total of 4 million since 2016. Peru is receiving around 5,000 Venezuelans a day, and around 900,000 Venezuelans have moved to Colombia, a third of those this year alone.

International Response

The Organisation of American States tried to convince the Western Hemisphere to take action in Venezuela, and threatened to expel Venezuela from the organisation if it did not accept international help or implement new measures, but to preempt such political embarrassment, Venezuela withdrew voluntarily.

Mercosur, an economic and political bloc comprising of Argentina, Brazil, Paraguay, Uruguay and Venezuela, suspended Venezuela in late 2016, citing the government’s violation of human rights.

The United States has introduced sanctions on Maduro, regime officials and on Venezuela’s new currency, but none of these seemed to have so far produced any notable impact on Maduro’s regime.

 

Venezuela’s problems only continue to worsen, and there seems to be no easy way out. In the beginning of August, Maduro, while speaking at a military event in Caracas, was the target of an assassination attempt involving explosive drones. This comes at a time when his government is receiving increasing criticism and backlash from within.

There is still, however, a loyal core of people who support him and his party (United Socialist Party), who believe Venezuela’s problems are caused by ‘imperialist’ powers like the US waging economic wars on Venezuela.

 

Written by Camila Bonchristiano, September 2018

Pipeline to controversy: Nord Stream 2

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The Nord Stream 2 (NS2) natural-gas pipeline from Russia to Germany has long been followed by controversy. Despite several years of transatlantic and European feuding over the $21 billion dollar project, the construction work has started in German coastal waters, and preparatory work in ongoing is ongoing in the four countries in which Nord Stream 2 has permits (Germany, Finland, Sweden, Russia). Although Denmark’s agreement is still pending, activities to lay pipes beneath the Baltic Sea are predicted to start shortly.

Origins of the project

With EU domestic gas production declining, new gas supplies and infrastructure are needed to meet future demand, hence the need for NS2. Gazprom, a Kremlin-controlled company, owns the project, which is also supported by German chancellor Angela Merkel’s government.

NS2 will run alongside the operational Nord Stream 1, giving the two pipelines a combined capacity of 110 billion cubic metres of gas per year, reducing the dependence of German gas distributors on intermediaries in eastern Europe.

From a business perspective, this pipeline will likely benefit a lot of Europe’s industrial giants, such as BASF (German chemical firm), who will have increased quantities of relatively cheap Russian gas and will therefore be able to better compete with American rivals that benefit from cheap gas.

Controversies

The pipeline has resulted in controversy in both Europe and America.

Poland, Ukraine and the Baltic nations have all sought to block the project, and many European countries fear that NS2 will increase Europe’s dependency on Russia’s gas and pipelines at a time when its own supplies are faltering. The pipeline also undermines Europe’s push for clean energy.

A big concern over NS2 is the effects it would have on Ukraine, which risks losing its role as a hub for the transit of Russian gas to Europe. The pipeline could squeeze Ukraine’s Naftogaz, which generated $2.8 billion last year from supplying Russian gas further west. Moscow argues that Kiev is an unreliable partner, and that its tariffs for transporting gas are so high that the Ukrainian route is uneconomic. Talks, brokered by the EU, are taking place between Gazprom and Naftogaz and their respective governments, but many fear that if NS2 advances, Russia won’t need to compromise or assure fair play to Ukraine.

NS2 will make it more difficult for companies in America to extend its footing in Europe, as it is cheaper to pipe natural gas than to liquefy it and ship it across the Atlantic. President Trump has criticised the project, stating that Germany would be made “a captive to Russia”, and has threatened the introduction of sanctions to the five European energy companies that are providing financial support to the project, which includes Uniper and Wintershall of Germany, OMV of Austria, Engie of France and Royal Dutch Shell.

Sergei Lavrov, Russia’s foreign minister, condemned Trump’s suggestion, claiming that the pipeline would not divide Europe and that the US president only wanted to stop the project to promote sales of American gas.

Written by Camila Bonchristiano, September 2018

 

Sources:

Nord Stream 2

Financial Times

The Economist

Image Source: European Network of Transmission System Operators for Gas (www.enstog.eu)

What they never told you about club penguin

The year is 2011. After a tiring day in primary school, your friend approaches you in the playground and asks you to join her on Blizzard later. You run home, and seizing the computer from your parents you type in http://www.clubpenguin.com … what a time to be alive.

A few years later, and every millennial was in tears over the game we all played for so long shutting down. But then, by some miracle, Club Penguin Rewritten appears on the internet, and suddenly everyone is playing again.

Although it seems as if it is a perfect replica, there is one clear difference – everyone’s a member. But why is membership so important to Club Penguin, and why does that change the game completely?

The answer is pretty simple, memberships is Club Penguin’s income. Without it, they have no way of making money. At first, it can appear quite confusing how a free game can make enough money to sustain itself, but here’s the explanation;

When a user signs up to the game, they can create a free account with which to play and experience what there is to Club Penguin. Theoretically, every single member could choose to play the game for free, and so Club Penguin’s creators raise no money – problem. However, this is a very unlikely scenario, thanks to the implementation of the membership scheme.

Once you introduce a membership scheme, you now have two options: you can choose the basic package, where you become like everyone else, or, for a low cost, you can stand out from the crowd with a membership. Since it comes with a cost, it becomes valuable. It is in high demand, but not readily given out to everyone. Now, when you sign up to the game, instead of enjoying all the free features, you are instead caught up in what you could have if you had a membership. Combine this with the fact that the target age range for club penguin is adolescents, and you have the perfect formula. Children always wanting more and more, and a highly-sought after ‘vip’ package available for the few not the many.

However, it is important to note that a membership must be deemed worthwhile in order to draw the attention of perspective buyers. If all members get is a little stamp that says congratulations, it’s unlikely they will want to invest. However, offer the chance to buy outfits, decorate a house, have cool pets and more, and suddenly everyone is attracted to the offer of a membership.

Once the early adopters invest in a membership, and you see them skirting around town with their new cool things, it makes everyone else on a free account want to be a part of the exclusive club.

This is what is called a ‘freemium business model’ whereby companies offer a basic version of a product free of charge, and then attract customers via a premium, paid alternative. Since its roots, it has now become one of the most popular business models which you will see in most Internet Startups and SaaS (software as a service).

Take Fortnite for example. It has quickly become one of the most hyped videogames in existence, and it does this by enticing players with their free version, and then sucking them in with additional features at a ‘tiiiiiiiny’ cost. Or what about Spotify? Free music seems great at first, but then this is only available over internet connectivity, you have adverts in between, and a limit on other features until you invest in the paid version.

Note the way that instead of it being “Oh how amazing it is to have free music to download” it actually becomes a negative “how come I can’t access this music offline”. We stop looking at the benefits of the free version, and instead are enticed by the paid version.

However, there are conditions for making this work. For example, and in the case of the Club Penguin remake, the premium service has to be rare. If everyone could have all the desired features, there would be no incentive to buy the membership as there is no added satisfaction (or in economic terms – utility). When Club Penguin Rewritten offers automatic membership to every user, it removes the unique selling point (usp) of the paid membership function, and therefore looses the ability to sell people this feature.

So then, does this new version of club penguin make money, and if so, how?

When the first version of club penguin shut down due to speculations that it didn’t generate enough money, it seemed crazy that another group might up and create the very same thing again. However, contrary to all economic pointers, nostalgia kicked in and we found ourselves with a new version of Club Penguin. Although not offering paid memberships, it does seem like it does generate some revenue: through adverts.

Once logged in, the page is scattered with Google Adverts, which although don’t interrupt your play experience, do quite literally stand out. Despite the obvious lack of clarity as to whether these make nearly as much as subscriptions, it is a plausible alternative if money was to be a main driver for the recreation of the game.

And so, what once was a game where membership was a highly sought after feature in a dying game, its recreation is a tribute to the millennials and game that united every child, membership or not.

Written by Joana Baptista, August 2018

The best adverts you’ve ever seen (in my personal opinion, within Chicago)

Cast your minds back a week to when I was gracing the streets of Chicago, eating lots of food, walking for miles, and spending money left, right and centre. While indulging in all of these activities, I also enjoyed admiring the various advertisements on display throughout the city. As an avid economist and marketer, I was interested not only in whatever it is they were trying to sell, but also how they did exactly that. And so, while reflecting back on a great trip, I’ve created this article highlighting some of the most ingenious and creative I saw, starting with…

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Snapchat adverts! On my very first evening in Chicago, I took the bus downtown, passing by The Trump Tower. After snapping a shot and looking through potential filters, I came across this one advertising a food chain called Wow Bao which was probably located close by. Since I love Chinese Buns, I saved the advert to return later to try one, although on the only day that I did find another store, it was early morning and I really didn’t feel like eating one. Over the week, I had many other instances of this, which led me to wonder; what makes this such a desired marketing tool? There are over 300 million snapchat users, or which 160 million are active daily, and it has been rated the number one social media platform by young people. A geo-filter lens, like this one, reaches between 40-60% of snapchat daily users. However, take this figure with a grain of salt, as it is based upon nationwide filters. An event run within just the Quad of the University of Alabama reaches 19,000 people, which is pretty good for a one time, short length, advertising campaign. Geo-filter marketing campaigns are generally one of the cheapest campaigns to run, costing approximately $600 to run over a 24 hour period in a relatively large location. Although, if you were to extend to a long period of time, there is money to be saved.

So, a successful advert? It definitely caught my attention, however maybe was less effective in turning attention into sales.

 

I also really enjoyed these displays outside the walls of the ULTA store by the Riverwalk. Although these aren’t strictly an external advert, branding on shop windows can play a huge part in encouraging customers into the store. I really liked the neon lights, they stood out against everything else on the street and looked really good when contrasted against the black and white words behind. Particularly, the signs display what ULTA stands for, and invited pedestrians to come in and see more about who they are.

I thought this branding was particularly effective, although maybe this was just for me because I love anything to do with empowerment. If you are decorating your store windows, this needn’t cost a lot, although it does have limited reach, since only those walking past your store can see your advert.

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While on the subject of beauty, this next advert was found on (several!!!) street poles across the neighbourhood in which I was staying in. Although, since they only appeared on the last day of my trip, I’m sure this campaign was spread across many places I didn’t see that particular day. I really enjoyed this advert because, aside from conveying a strong brand message, was an innovative approach to advertising that definitely made me smile walking past. Printing out pieces of paper is probably one of the most cost-efficient and simple marketing techniques you can achieve, and aside from the cost of sending people around pinning them up, and the number that would be ruined in no time at all, this probably has a high return on investment. I thought the idea of the rippable strips with the ulta website on were a good way to get customers to purchase, while engaging them in a challenge to pick their shade.

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This advert was found on the door to a Beauty Salon, offering hair cuts, nail treatments etc. I thought the slogan on the front door was just hilarious, and just so simple. You had to be attentive to see it, but it definitely set it apart from all its competitors on the same street. I wouldn’t really call this mass advertising, but it certainly would make me pick this shop if I was hesitant, or looking at competitors.

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Similar to the previous one but in a different location, I spotted this sign above another Salon. Although, in my opinion, less effective than the other, it was still enough to put a smile on my face and want to take a picture of it. Small and simple, it is a more than affordable way to convert customers who are considering but undecided and to portray your brand ethos.

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Snapped while waiting for the ‘L’ train to take me to the airport, among many other adverts of similar nature, was this sign advertising prepaid internet. However, what made this, and other, adverts stand out was not the content but the language in which it was being advertised. In England, I never see adverts in foreign languages, and I certainly didn’t expect any in Chicago, much less in Spanish, however, I was pleased to see them.

This is such an effective way of targetting your audience, which Xfinity have clearly identified as Spanish speaking members. By creating an advert in Spanish, it immediately stands out from the rest and gives the Spanish speaking community a sense of belonging within that company, who have identified THEM as worthwhile members of the community. However, by doing this, you immediately cut off all non-Spanish speakers from your advert, who may feel angry that they can’t understand an advert in their own area of residence.

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This advertising technique was *disclaimer* not actually something I saw in Chicago, but rather something a friend of mine posted to her snapchat and I loved so much that I saved it. The concept is this; she walks into a shop, wants to buy a dress and is happy to pay the price. The cashier says that she can actually attain the dress for a cheaper price if only she posts the dress to Instagram and tags the shop. Steal, she thinks, and agrees to the deal. I LOVE this idea. A modern twist on word of mouth, by sharing this dress on Instagram she is communicating to her whole network that she loves the brand and others should take a look too. For a small cost of selling the dress below the original price, they gain the loyalty of the customer, and increased brand exposure to all the followers of the customer’s account.

However, possible risks might include offering this deal to someone who’s fans are not interested in the same things, offering to someone with little to no followers, or giving someone the discount who then doesn’t share your outfits online.

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Simple, but spreads the message, and definitely enticed me in. The prospect of a new phone definitely caught my attention, and I spent a good few minutes eyeing up the poster after that. However, my criticism has to be the small print below ‘get an iPhone 8…’ as it is confusing and put me off. Had it just said ‘terms and conditions apply’ I would have most definitely walked right into the store and inquired about the deal, however, by putting in lots of conditions and big words I don’t know the meaning of, I was left confused and walked away. Despite this, 11/10 for clear, simple messaging and effective in pulling a consumer in to learn more.

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And last but by no means least, something that isn’t actually quite an advert. Between pulling a huge suitcase, balancing two overly heavy backpacks and trying to hurry to check in, I just had to stop and snap a picture of this humorous car parking system. As mentioned, it’s not actually advertising anything other than Chicago based sports teams, but more than that it is promoting the character of the airport, which might, in turn, make customers more willing to return in the future, or pass on positive feedback about their experience to other potential customers.

 

Although there were many other adverts I loved, including one, in particular, I didn’t get a picture of, these were just a few highlights to demonstrate that it is possible to find economics, and business, in everyday life! Seen any other cool adverts? We’d love for you to share them:)

Written by Joana Baptista, August 2018

Supreme Risks in the Supreme Court

 

The Supreme Court consists of nine justices, and in the last decades, it has had a balanced composition, with some more conservative, others more liberal and one or two swing judges. For the past 12 years, Anthony Kennedy has arguably been the Supreme Court’s swing vote, as he was the only justice who did not vote predictably.

On July 31st, Kennedy announced he would be ending his tenure as a justice, which led to many Americans reacting with much dismay, especially as President Donald Trump now has the opportunity, still in the beginning of his presidency, to appoint a second Supreme Court justice and try to cement a 5-4 conservative majority.

Trump’s first appointment only happened because the Republicans, who held a majority in the Senate, did not ratify Obama’s Supreme Court nominee, Merrick Garland, for 293 days, allowing Trump to pick a judge when he became President. This time around, however, Trump will likely be quick to pick his nominee as he must try to secure the ratification before the mid-term elections in November, which may affect the Republican majority in the Senate and would result in the Democrats accordingly attempting to ensure Kennedy’s replacement would not be strictly Conservative.

Anthony Kennedy, who was nominated by Ronald Reagan in 1988, even though he followed a more conservative philosophy, was praised by his treatment of individual rights, calling for tolerance of free expression and association, which led him to occasionally support more liberal standings – he stood up for abortion and gay rights, and protected affirmative action (or positive discrimination) at universities, amongst other things.

Recently, however, he has voted with the conservative bloc – in the recent past, with Kennedy’s support, the court upheld Trump’s ban on travel from several mostly Muslim countries and declined to condemn gerrymandering, upholding congressional maps in Texas that, according to lower courts, discriminated against black and Latino voters.

Once a conservative majority is reached, Republicans will be incentivised to push for more radical change, which may include attempts to overturn liberal rulings of recent terms, meaning abortion, gay rights, racial equality, voting rights and environmental protections may all become vulnerable.

With the legislative branch coming more and more gridlocked in the past few terms, the Supreme Court’s decisions have become even more influential in the law-making process as it decides whether to overturn or uphold state laws and presidential decrees. What was once called the “least dangerous” branch of government by Hamilton could now become the most powerful and threatening branch to many people.

Written by Camila Bonchristiano, June 2018

 

Sources: 

The Economist

Slate

 

To what extent has Hillary Clinton’s Social Impact shaped the view of women in America?

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Hillary Diane Rodham Clinton, born October 26th 1947, is an influential political figure in the United States of America. She served as First Lady between 1993-2001, US Senator for New York between 2001-2009, and was the Democratic Party’s nominee for President in the 2016 election. As First Lady, she was an advocate for gender equality and health care reform, persevering while under public scrutiny for her marriage. She became the first female senator for New York in 2000, and won far more delegates to any previous women for the Democratic nomination while running for president in 2008. Clinton helped organize diplomatic isolation and international sanctions during the Arab spring while serving as Secretary of State under the Obama Administration, and then successfully became the first female to be nominated for presidency by a major U.S. political party in the 2016 elections.

 

Aside from her obvious political influence, Clinton has made a mark for herself in the world with her social work through charity, public relations and work for female equality.

 

One of her biggest contributions to the disadvantaged in the US has been through the Clinton Foundation, which she set up with her husband and daughter. The foundation, established in 2013, works directly or with the support of partners to create economic opportunity, improve public health and inspire civic engagement and service. Her stand out work has included a $600 million initiative to encourage girls to progress into secondary education worldwide, and the Too Small to Fail initiative. Although Hillary hasn’t sat on the board since 2015, and the foundation has come under fire numerous times including during her running for presidency, her work has impacted the lives of many. The Clinton Foundation has made great progress in the healthcare sector, raising over $313 million for R&D into new vaccines and medicines, providing treatment for more than 36 million people with tropical diseases and providing better maternal and child survival care to more than 110 million people.

 

However, there are certain charity watchdogs who either don’t respect the foundation, or perhaps believe it is a political stunt over a true do-good operation. Charity Navigator, a respected charity watchdog, removed the Clinton Foundation from its site as it didn’t believe the projects that it funded matched with their ranking system. Despite this, there are other watchdogs who do value the work they do, with another watchdog recruited by fortune.com ranking the organisation an ‘A’ for its work. This is as a result of The Clinton Foundation in 2014 spending 88% of its funding on programs, rather than overhead, and raising $100 from every $2 invested.

 

Aside from her positive influence through the Clinton Foundation, Hillary has also influenced society through her experiences during the presidency of her husband Bill. She became the first inaugural first lady to have earned a PhD and hold her own personal professional career up to the time of entering the white house. She was also the first to have an office in the west wing as well as the usual office of the first lady in the East wing of the White House. Clinton has been regarded as one of the most influential presidential wives in US history, after Eleanor Roosevelt.

 

She has faced a lot of critics, who viewed her active role in politics as ‘inappropriate’, however, her keen work in health care, violence against women and more helped her earn respect for her positive use of her position of power. However, she has had many successes including being a force behind the passage of the State Children’s Health Insurance Program in 1997, promoting nationwide immunisation against childhood diseases and encouraging women to get a mammogram to screen for breast cancer screening, with coverage provided by Medicare. At the National Institute of Health, she managed to secure more funding for research into both prostate cancer and childhood asthma and worked to investigate into an illness that affected veterans of the Gulf War, known as Gulf War Syndrome.

 

Clinton has also been responsible for a number of policies that have shaped the role of women in society during her time as First Lady. She helped create the Office on Violence Against Women at the Department of Justice, initiated the Adoption and Safe Families Act in 1997 which is now often regarded as her greatest accomplishment as first lady and was instrumental in the passage of the Foster Care Independence Act in 1999. Hillary also broke the record previously held by Pat Nixon for the most-travelled first lady, visiting a total of 79 countries. During a speech during the Fourth World Conference on Women in Beijing, China in September 1995, Clinton spoke out against abused women around the world, and especially in China itself. Despite both internal administration and Chinese pressure to soften her words, she addressed delegates from over 180 countries saying “If there is one message that echoes forth from this conference, let it be that human rights are women’s rights and women’s rights are human rights, once and for all.” Hillary also became one of the most prominent international figures speaking out against the way the Taliban treated Afghan women, and helped created Vital Voices, an international initiative sponsored by the US.

 

Aside from her political contributions during her time as First Lady, she has proven herself as a characterful and headstrong lady even during allegations and investigations against her and her family, including, most famously, the Whitewater Investigation and the Lewinsky Scandal. The Whitewater investigation looked into alleged criminal wrongdoing on Clinton’s behalf in relation to the alleged improper subsidisation of Whitewater Development Corporation losses by Madison Guaranty, who were owned by a pair who were the Clintons’ partners in investment. During the investigation, Hillary became the first First Lady to be subpoenaed, and the whole trial occurred during the 1992 presidential campaign and during the whole duration of her term as First Lady.

 

Although the Lewinsky Scandal was nothing of her own doing, Hillary was caught in headlights after allegations of an affair between Bill Clinton and Monica Lewinsky. The scandal came to light as part of the Paula Jones case, in which Bill Clinton was accused of sexual harassment, however was later dismissed from allegations and later settled for $850,000 when Paula Jones appealed the hearing. However, the Clinton-Lewinsky Scandal did test Clinton’s devotion to her marriage and her values as a First Lady. Despite Clinton’s initial denials of such claims of a relationship with Monica Lewinsky, he later deemed it an ‘improper physical relationship’ in a taped grand jury testimony, and was then charged with obstruction of justice and perjury. This led to Bill Clinton being impeached as president, yet throughout this Clinton remained true to her husband and stayed with him. However, she has received criticism for blaming the women involved in the scandals rather than her own husband, and for supporting Bill in lying about the validity of the claims. However, the scandal improved Hillary’s public approval ratings to over 70%, the highest they had ever been, as people both sympathised with her and admired her self-strength and dedication to her husband.

 

In Conclusion, it is clear to see that Hillary has contributed hugely to the image of women in the US, despite both positive and negative reception of work she has undergone in the spotlight. Even when her morals were being tested, her husband was under investigation, and she was losing public support, Hillary Clinton has made a name for herself as a receptive and engaging figure with an overarching positive influence. her work as a first lady, and the way she has handled herself through public accusations and disputes has shown her professionalism and courage and has made a big difference in the way people view women in the US. She’s given them credibility through her pioneering attitude and by becoming the first to achieve many major milestones as a woman.

What is fuelling Brazil’s truck crisis?

Towards the end of May and beginning of June, Brazil faced a chaotic truckers’ strike, exacerbating the country’s economic and political crisis. The strike cost the country an estimated loss of at least R$30 billion (approximately US$8 billion) of economic production, and is expected to impact the fiscal balance of the country.

Background

During the administration of Dilma Rousseff, Petrobras, Brazil’s biggest oil company, was forced to sell gasoline and diesel below international prices as a means to keep inflation down, costing the company billions of dollars in foregone revenue.

After Michel Temer took over as President, however, the government swung in the opposite direction and allowed Petrobras to align its prices to the international market’s, which coincided with the recent volatility of oil prices.

The recent rise in the value of the dollar relative to the Real, Brazil’s currency, also drove up the domestic cost oil of in the local currency.

The Strike

On the 18th of May, truckers and the many associations that represented them alerted that if the government did not halt increases in diesel prices, truckers would go on a strike. The following day, Petrobras announced a price increase of 0.8% for diesel based on the increase of international oil prices, which led to a strike on the 21st of May.

During the first day of the strike, some highways were partially or totally blocked and by the 23rd of May, airports started to suffer a lack of fuel, and some key hubs with fuel left for only one day. Moreover, as a result of trucks halting fuel and food deliveries amongst other things, cities such as Sao Paulo and Rio de Janeiro declared a state of emergency. President Temer asked for a truce for two or three days so the problem could be solved, and Petrobras announced it would reduce diesel prices by 10% for 15 days.

On the 24th, the President’s Chief of Staff announced that the government had reached an agreement with representatives of the truckers, which stated that the strike would be suspended for 15 days. Despite this announcement, the strike continued, leading President Temer to suspend negotiations and to send troops to end roadblocks, which the Supreme Federal Court authorised. By the end of the day, the government claimed to have removed 45% of all roadblocks.

On the 26th, Temer and Petrobras announced several measures that would be taken, which included diesel prices being reduced for 60 days and the provisional establishment of minimum shipping prices. By the 28th, various associations of truckers announced that the truckers should end the strike as the truckers’ main goal had been achieved, and as the crisis was affecting a variety of establishments such as schools and hospitals.

Post strike events

After 10 days of chaos, the strike finally came to an end, and Petrobras’ CEO was forced to resign. Although the strike is now over, it exposed the country’s economic fragility and dependence on road transport.

Moreover, as part of the agreement with truckers to reduce diesel prices, the government has introduced subsidies, which will cost the government around R$3.4 billion (US$1 billion), worsening its already critical fiscal deficit. To finance these subsidies, an increase in taxes on exporters, soft drinks and chemical industries will be introduced, as will cuts in investment in some programs including health and education – a move likely to cause an increase in dissatisfaction with the government.

 

Image Source: AP News

Written by Camila Bonchristiano, June 2018

 

Sources:

The Guardian

Wiki

Should the UK prioritise Economic Growth as its main macroeconomic objective?

Economic Growth, referring to the increase in real GDP of a country over a given time period, is one of 7 key macroeconomic objectives that a country aims to achieve. Others include low inflation, low unemployment, good balance of payments on the current account, good fiscal position, even income distribution, and sustainable environmental position.

The UK government definitely has reason to believe that economic growth should be its main macroeconomic objective as it is a good indicator of the performance of the overall economy. Without economic growth, it is likely that other macroeconomic objectives could not be met. For example, without economic growth, employment would likely decrease as the economy does not need to hire additional workers in order to meet extra demand. Furthermore, export-led growth is essential to improving the balance of payments on the current account, another key macroeconomic objective. Economic growth also makes people better off, and is therefore very important to maintain.

However, economic growth does have a conflict with some other macroeconomic objectives, such as inflation. High Economic Growth does drive an increase in price levels if it is an increase to Aggregate Demandwhich has caused the economic growth.

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In this instance, average price levels rise, leading to increased inflation, which can push inflation outside of the target zone of 2% ± 1% (for the UK). However, low inflation is needed in a healthy economy, and therefore sustained economic growth can be essential to an economy in terms of its positive effects on inflation. Furthermore, if economic growth is fuelled by an increase to Aggregate Supply, then economic growth can occur while decreasing price level, which therefore means both policies work hand in hand, unless AS increases so substantially that it leads to inflation below target levels.

If economic growth is not export-led,  of which is often the case in the UK economy, another macroeconomic objective that economic growth infringes with is a good balance of payments. When the UK pound appreciated against other countries, we can expect to see a fall in the price of imports and increase in the price of exports, which leads to more money being spent abroad than in the UK economy, worsening the balance of payments. However, export-led growth can only occur is UK goods are attractive in foreign markets. If there is high inflation, goods may become less competitive abroad, just as they would be if there are taxes or tariffs places on the goods. Furthermore, consumers may be brand loyal, or may simply not like the product if it is not of a good enough standard in comparison. Therefore, it can be difficult to achieve export-led growth, which can become a problem in terms of the balance of payments if Economic growth, and export-led growth, in particular, is pursued by the UK government as its key macroeconomic objective.

Further to this, economic growth also faces clashes with other macroeconomic objectives, such as environmental issues, and even income distribution. When pursuing economic growth, this often leads to increased production, which comes at the cost of the environment. However, the UK is a largely service-based economy, and therefore might not bring about as much damage to the economy as increased production of textiles, or cars, for example. Furthermore, in a service based industry people can more often work from home, reducing traffic congestion and pollution.  Nevertheless, economic growth also leads to more disposable income, which might lead to more people deciding to go on expensive holidays abroad, or buying a new car, for example. Also, firms are likely to recruit from further afield if they are expanding, and the government might pursue extra construction projects to improve the economy, all damaging the environment.

With Economic growth as the key macroeconomic objective, even income distribution can be hard to achieve. It is likely that with economic growth, the wealthier are likely to receive disproportionately greater rates of increased income compared to those on low incomes, which can worsen the gap between rich and poor. However, there is theory to suggest that this extra income will ‘trickle down’ to those on lower incomes. As well as this, economic growth does mean that firms might look to expanding, hiring more and for better wages, which can help reduce the income gap.

In conclusion, economic growth is essential for any economy and is a key measure of success within the economy. However, there are other factors that are equally important within the economy, and therefore must be considered before pursuing economic growth as the key macroeconomic objective for the UK economy.

Written by Joana Baptista, June 2018

How does the World Cup score in economic terms?

When a country is chosen to host the World Cup, there are a series of investments that must take place – building of infrastructure, including stadiums, airports, roads; improvement of hotels, businesses and restaurants. This can initially become an economic burden for the country as a large investment is required, but the event is also expected to bring large economic benefits due to the additional jobs created, the development of host regions, the large number of tourists visiting the country, and increased investments due to international exposure, all of which increase the Gross Domestic Product (GDP) of the country.

The impact of the World Cup, however, varies depending on the country in which it is taking place. Below, you can see the different effects the event had on Brazil (2014), and the expected effects on Russia (2018).

BRAZIL, 2014 WORLD CUP: 

Image result for brazil world cup 2014 stadiums

When Brazil was chosen to be the host of the 2014 World Cup, there was a lot of optimism over the economic benefits the event could bring, considering that a large number of tourists would visit the country, benefiting a variety of industries and putting the country into the spotlight.

However, whereas the event has meant that certain aspects of the economy have flourished, other aspects have stagnated or even declined.

Tourism

Although the World Cup did attract one million tourists who travelled specifically for the event, overall tourism actually declined by 11-15%, according to the Brazilian Airline Association, probably due to standard tourists opting to not go to avoid the influx of football fans in the country. Moreover, the tourists the event did attract provided around $14 billion into the economy, which is not much more than the  $11.3 billion spent on preparations for the event, namely on infrastructure and services.

Employment

Another area which the government hoped would benefit from the World Cup was employment. The government declared that one million jobs were created, but these figures actually show that job creation in June that year was the lowest since 1998. Also, although many jobs were created, during the World Cup, many host cities declared municipal holidays on game days, shutting down businesses and failing to gain much from the increase in tourists.

Infrastructure

Before the World Cup, various cities in Brazil already needed increased investment in infrastructure, especially in public transportation, which would benefit locals as well as tourists.

A long-term effect of the World Cup, however, is the misuse and lack of use of the event’s infrastructure. The stadium built in Manaus, for example, has a capacity of over 40,000 people and cost around $300 million, but will be used by a division-four club, with an average attendance of less than 10% of the capacity. This therefore means that the money spent on the stadium is going to exceed the money coming in.

The negative effects of the World Cup also disproportionately affected lower-income citizens – around 170,000 people were forced out of their homes so that there was more space for stadiums, roads, etc.

Another problem Brazil encountered during the Cup was corruption – Brazil has had an extensive history of corruption, especially amongst construction firms and politicians, both of which, of course, are highly involved in the World Cup, raising suspicions about whether politicians who usually benefit from construction firms would act as ‘watchdogs’ over the billion-dollar World Cup contracts. Odebrecht, one of the main construction companies in Brazil and one of the companies proved to be involved with corruption, won four stadiums contracts worth billions along with a much-criticised contract to operate Rio De Janeiro’s Maracana stadium for 35 years.

 

RUSSIA, 2018 WORLD CUP (mostly predictions): 

Image result for russia world cup 2018 stadiums

Jobs

According to the Russia 2018 Local Organising Committee, around 220,000 Russians have gained jobs, be it in the transport and communication industry or the construction industry. It is still early to tell, however, how many of these jobs will be maintained.

Tourism

Although the number of tourists that are going to Russia is still unknown, it is likely that the number of visitors in this World Cup is relatively lower, due to Russia’s approaches to human rights such as free speech, and the increase of racism, homophobia and suspicion of the West that has grown under Putin.

Nevertheless, the tournament is said to have boosted the image of the country with its high quality of organisation of the event and its security, which might encourage more visitors in the near future.

Infrastructure

Russia also now has a range of new or improved infrastructure – eight new stadiums, four new arenas, ten new projects for the construction and modernisation of water and sewage systems, sixteen repaired hospitals, 622 new ambulances, amongst other improvements. In terms of transport, the capacity of airports in host cities has increased by at least 30%, and twenty railway terminals and stations were reconstructed and modernised.

Predicted overall impact

The overall impact of the Cup on the economy, although it is still mostly based on predictions, has been questioned by economists, who believe that the World Cup will have a short-lived impact on the economy, despite Moscow’s hopes that the billions of dollars spent – around $11 billion, though this doesn’t include some costly new infrastructure that organisers say would have been built regardless – will lead to an economic boost.

Rating agency Moody’s Investors Service has expressed beliefs that the economic impact will be limited and short-lived due to the short duration of the World Cup, and the “very large size of the country’s economy”. The limitedness of the impact could also be due to the fact that the sectors expected to benefit most from the increase in tourists are not the key growth drivers in cities’ economies, and that any economic growth would be, to a large extent, driven by investments generated by preparations for the event, rather than the event itself, meaning the industries would only see a temporary boost in revenue.

 

Written by Camila Bonchristiano, June 2018

 

Sources: 

Business Insider

The Urban Twist

Reuters

ESPN

Moscow Times

The economics of love island

If you’re unaware of the ITV2 Hit show Love Island, chances are you have a life and are far too busy doing something worthwhile with your time to spend an hour every evening watching attractive men and women ‘couple up’ for a chance to win £50,000.

But while the general public stirs up a storm with gossip over who said what, memes and their love for Alex the A&E Doctor, I am much more interested in the economics of the show.

Love Island is a classic example of Game Theory, and is a great way to illustrate such a concept. But firstly, what is Game Theory?

Otherwise described as ‘the theory of social situations’, Game Theory can be used to analyse different social situations in order to conclude the most rational output of a decision, and what participants actually chose to do.

Let’s apply this to Love Island…

Consider coupling up. Every week, each couple on the island has the option to remain in their couple, or choose to recouple. Every so often, new Islanders enter the villa to throw the couples off balance and incentivise a switch in couple. But what is the best outcome, and what should contestants rationally pick, all other factors aside?

This dilemma is much like that of the prisoners dilemma, which is what is often used to model Game Theory. Let’s take a girl, Grace, and a Boy, Ben, and consider their best options.

Outcome 1: Both Remain

If both Grace and Ben choose to remain in their couple, Then although they gain in their security from not being dumped, they have a net loss of 1 each, as they forfeit the opportunity to get to know someone new.

 

Outcome 2: Girl Recouples

Now let’s take the instance that Grace recouples, but Ben chooses to remain. In this instance, Ben loses out because he is at risk of being dumped, as well as no longer being with the girl that he wanted to remain with. Ben gets -15. But, Grace, who chose her personal gain over the gain of the pair, is not at risk of getting dumped as she still has a partner, however sacrifices Ben, her previous partner. She has a net gain of 0.

 

Outcome 3: Boy Recouples

Just like the instance above, but in reverse, if Grace chooses to remain with Ben, but Ben chooses to recouple, then one gains nothing, and the other loses 15.

 

Outcome 4: Both Recouple

If both choose to recouple, then although they get a new partner they wanted to be with, they have also both had the other recouple against them, and so both lose. However, they don’t lose as much as they would have if they had chosen to remain, and the other had chosen to recouple. So both lose a net of 10 each.

 

All these outcomes can be illustrated in the following graph below:

 

Screen Shot 2018-06-15 at 20.37.17.png

 

So, what’s the most beneficial outcome?

Clearly, if both chose to remain, then as a pairing, they collectively lose the least. In this case, they both lose -1 each, a total of -2. Any other option would lose them at least -15 as a pairing, or up to -20.

 

But, what’s the most rational decision to make?

However, in rational economics we aren’t considering group effects, we are considering the maximisation of the utility of an individual consumer (we aim to maximise the satisfaction of a consumer). Therefore, the most rational decision is for an individual to choose to recouple. If either Grace or Ben chooses to recouple and the other chooses to remain, they get off with no loss, which is better than a loss of -1. However, I know what you’re thinking, if they both choose to recouple then the net loss is greater, so how is this beneficial? Because if an individual chooses to remain, they risk losing up to a value of 15, which is worse than the possibility of losing a value of 10. Therefore, rationally, one should choose to recouple to have a chance at the possibility of no negative output, and not risk the greatest negative output.

 

So that’s Game Theory, as explained through Love Island.

 

Now before you all go ahead and apply to Love Island thinking you have what it takes to win, one must be aware that more people applied for love island than Oxbridge. While over 85,000 Brits made an application for Love Island, only 23,521 applied to either uni…

 

Maybe we should just stick to studying it from afar, eh?

Written by Joana Baptista, June 2018

 

Inspired by: Alex Teytelboym, The Guardian, and  Trashy Game Theory